Conning Study Says Workers’ Comp Market Faces Major Shift as State Funds Swell

April 29, 2003

State-sponsored funds have quickly become a force in the workers’ compensation insurance market, altering the competitive landscape for the private insurers that once dominated this line of business, according to a new study by Conning Research & Consulting, Inc.

The study, “Workers’ Compensation State Funds – What You Don’t Know Might Hurt You,” finds that in states that have state funds, they now account for nearly a third of the national market.

“Insurers that have historically profited from the workers’ compensation line are now facing a new challenge,” said Michael Weinstein, Director of Research at Conning. “State funds’ presence is a de facto entry of new capital into the industry which will have implications well beyond the current pricing cycle.”

Since workers’ compensation is the largest line in commercial property-casualty insurance, any major change in the industry’s competitive landscape has important consequences. The study analyzes how just such a change has occurred over the period 1997-2001. In the 21 states with completive state fund models, the state funds now account for over 30 percent in premium written. Equally importantly, Conning found that for the first time in 2001 the State Funds produced a better combined ratio than the private carriers.

“State funds have a supply motive rather than the profit motive typical of private carriers,” continued Weinstein. “If these continue to be viewed as successful models, particularly in the current environment of rising prices, other states may adopt state funds, further altering the competitive situation in this important line of business.”

The study analyzes the core issues necessary to understand the performance of the state funds, from their premium growth and evolving market position, to their underwriting results and reserves adequacy. On many dimensions the state funds have reportedly outperformed the private carriers.

The study, “Workers’ Compensation State Funds – What You Don’t Know Might Hurt You,” is available from Conning Research & Consulting, Inc., by visiting the company’s Web site at

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